Vocab Flashcards
Spending more money than available in an account
Overdraft
Spreading investments to reduce risk
Diversification
A retirement savings plan with tax benefits
Individual Retirement Account (IRA)
The idea that money today is worth more than the same amount in the future
Time Value of Money
Money left after necessities and fixed expenses
Discretionary Income
A credit line that allows borrowing up to a limit
Revolving Credit
A loan repaid in regular payments over time
Installment Loan
The lowest amount that must be paid on a credit card bill
Minimum Payment
The amount paid out-of-pocket before insurance covers the rest
Deductible
The value of a person’s assets minus liabilities
Net Worth
A numerical rating of a person’s creditworthiness
Credit Score
The yearly cost of borrowing money, including interest
Annual Percentage Rate (APR)
The value of the next best alternative foregone
Opportunity Cost
An employer-sponsored retirement savings plan
401(k) Plan
Insurance that covers damages or injuries caused to others
Liability Coverage
Total earnings before deductions
Gross Income
A tax system where higher income earners pay a higher percentage
Progressive Tax
Earnings after taxes and deductions
Net Income
Ownership in a company
Stock
Profit from selling an investment for more than its purchase price
Capital Gain
A measure of how much debt a person has compared to their income
Debt-to-Income Ratio
Insures bank deposits up to a certain amount
Federal Deposit Insurance Corporation (FDIC)
The amount paid for insurance coverage
Premium
Evaluating products to find the best quality and price
Comparison Shopping
The difference between income and expenses
Net Cash Flow
Purchasing without planning or consideration
Impulse Buying
The trade-off between potential risk and potential gain in financial decisions
Risk vs. Return
How quickly an asset can be converted into cash
Liquidity
The rate at which the general level of prices for goods and services rises
Inflation
A plan for income and expenses over a specific period
Budget
Taxes for social security and medicare
Federal Income Contributions Act (FICA)
A tax form showing annual earnings and taxes paid
W-2 Form
Savings set aside for unexpected expenses
Emergency Fund
The cost per unit of product
Unit Price
A legal process for those unable to repay debts
Bankruptcy
A bank account used for saving money with interest
Savings Account
A guarantee from a seller regarding a product’s condition
Warranty
Laws that safeguard buyers from fraud and unfair practices
Consumer Protection Laws
A pooled investment for more than its purchase price
Mutual Fund
Interest earned on both the principal and previously earned interest
Compound Interest
A loan to a company or government that earns interest over time
Bond
Costs that fluctuate monthly
Variable Expenses
A type of credit score used by lenders
FICO Score
A bank account used for everyday transactions
Checking Account
Costs that do not change monthly
Fixed Expenses
A tax form used by employees to determine tax withholding
W-4 Form
